SMM Morning Comment For SHFE Base Metals December 13

SHANGHAI, December 13 (SMM) –
Copper
LME copper prices opened at $8376/mt and closed at $8350.5/mt in overnight trading, a drop of 0.01%, with the low-end of $8305/mt and the high-end of $8389/mt. Trading volume was 18,000 lots, and open interest stood at 287,000 lots. The most active SHFE 2401 copper contract prices opened at 68050 yuan/mt and finished at 68000 yuan/mt overnight, with the high-end of 67740 yuan/mt and the low-end of 68090 yuan/mt, down 0.01%. Trading volume was 26,000 lots, and open interest stood at 142,000 lots. On the macro front, the U.S. non-seasonally adjusted CPI annual rate growth slowed to 3.1% as expected in November, and the month-on-month growth rate unexpectedly accelerated to 0.1%; the core CPI growth rate was 4% year-on-year, the same as in October, and the month-on-month growth accelerated to 0.3%, both In line with expectations. The higher-than-expected CPI month-on-month growth rate has, to a certain extent, dampened market expectations that the Federal Reserve will soon start cutting interest rates, and the market is waiting for Powell to speak. In terms of fundamentals, copper prices and premiums/discounts both fell back yesterday, but the price spread between front-month and next-month contracts was still large. Downstream purchasing enthusiasm was not high. According to SMM, imported copper arrived in east China, but downstream purchasing appetite was not high as delivery is approaching. Market transactions were limited, lowering premiums and discounts. Inventories in South China have increased for three consecutive days, and holders lowered prices, but downstream still believes that procurement is not cost efficient. Trading was not active. Consumption will weaken before the delivery of the SHFE front-month contract. In addition, Cobre, one of the world's largest copper mines, was asked to close, which grew supply concerns next year. Copper prices are expected to remain rangebound before the announcement of the Fed’s rate decision.
Aluminum
Overnight, the most-traded SHFE 2401 aluminum contract opened at 18435 yuan/mt, with high and low at 18485 yuan/mt and 18375 yuan/mt before closing at 18405 yuan/mt, down 25 yuan/mt or 0.14%. LME aluminum opened at $2121/mt yesterday, with its high and low at $2143/mt and $2116/mt respectively before closing at $2124/mt, flat from the previous trading day.
On the macro front, the market is beginning to bet on the Federal Reserve to cut interest rates next year. There are growing expectations for the release of favorable policies in China at the end of the year, but it will still take time to transmit to the manufacturing industry and other sectors. In terms of fundamentals, there are no further changes expected on the supply side in the short term, and market trading logic generally focuses on the resilience of consumer demand in the off-season. Aluminum prices may be relatively weak, but should find support from falling stocks.
Lead
LME lead open at $2056.5/mt and rose during the Asian trading hours yesterday. It rose to $2084.5/mt during the European trading, before falling to $2032.5/mt, and finally dropped and closed at $2036/mt, down 0.85%.
The most active SHFE 2401 lead contract prices opened at 15625 yuan/mt last evening, and closed at 15545 yuan/mt, a drop of 0.19%, with the high-end of 15645 yuan/mt and the low-end of 15510 yuan/mt.
Zinc
Overnight, LME zinc opened at $2412.5/mt, hitting a low and high of $2411.5/mt and $2459/mt respectively, and closed at $2428/mt, up $11/mt or 0.46%. Trading volume decreased to 8227 lots, and open interest grew 1433 lots to 204,000 lots. LME zinc inventory dropped by 2750 mt or 1.28% to 212250 mt. The U.S. dollar index fell all the way at the beginning of the session. However, during the night, U.S. inflation data was released. The U.S. non-seasonally adjusted CPI annual rate growth in November slowed to 3.1% as expected, and the month-on-month growth unexpectedly accelerated to 0.1%. The core CPI growth rate was 4% year-on-year, the same as in October, and accelerated to 0.3% month-on-month. The data showed that the possibility of a U.S. interest rate cut in March was reduced, and the adjustment in interest rate cut expectations affected the confidence of the LME zinc market.
The most active SHFE 2401 zinc contract prices opened at 20880 yuan/mt and gained 75 yuan/mt or 0.36% to settle at 20810 yuan/mt, with the high-end of 21030 yuan/mt and the low-end of 20780 yuan/mt. Trading volumes decreased to 44881 lots and open interest fell 1668 lots to 77836 lots. During the night session, the rise in the U.S. dollar index caused macroeconomic pressure on non-ferrous metals. SMM expected that refined zinc output will run at a high level in December. SHFE zinc has weakened due to expectations of increased supply.
Tin
SHFE 2401 tin contract rose to 207500 yuan/mt overnight and closed at 207480 yuan/mt, up 0.63%.
Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at premiums of 0-300 yuan/mt over SHFE 2401 tin contract, versus premiums of 300-800 yuan/mt for delivery brands, premiums of 800-1100 yuan/mt for Yunxi brand, and discounts of 200-700 yuan/mt imported brand tin ingots. Yesterday, SHFE tin price rose slightly during the session and then fell back. Traders reported that downstream companies mostly placed orders at low prices and trades were thin.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 131090 yuan/mt, and closed at 131800 yuan/mt, down 260 yuan/mt. Trading volume fell by 51978 lots, and open interest decreased by 1883 lots. From a fundamental perspective, the supply of pure nickel has declined slightly, but downstream demand for pure nickel is limited. Nickel price is expected to move rangebound, with little upward momentum.